With these reports, consumers are not going to increase purchases.
- The Reuters/Zogby Index, which measures the mood of the country, fell dramatically to 87.9, down from 95.5 in April, as nine of the 10 measures of public opinion used in the Index dropped.
- Concerns about the direction of the country and personal finances rose sharply, and dissatisfaction with Bush, Congress and the administration's economic and foreign policy all climbed.
- Bush's approval rating fell 4 percentage points to 23 percent, a record low for pollster John Zogby, and positive marks for the U.S. Congress fell 5 points to tie an all-time low at 11 percent.
- The number of Americans who believe the country is on the right track fell from 23 percent to an abysmal 16 percent, another record for pessimism, as uncertainty about the economy and rising gas prices fuelled growing doubts about the future.
- Consumer confidence fell to a 28-year low this month as rising prices strained household finances, the economy shed jobs, the housing market struggled and the cost of gasoline rose to $4 a gallon.
- The poll found the percentage of Americans who feel good about their personal financial situation this month fell from 53 percent to 46 percent. Zogby said a majority of Americans expect gas prices to eventually hit $5 a gallon.
- Positive marks for the Bush administration's foreign policy also tumbled, from 24 percent to 19 percent, and approval ratings for economic policy fell from 16 percent to 12 percent.
- Slightly fewer Americans feel safe from foreign threats and are proud of the United States, and the number of Americans confident their children will have a better life dropped from 65 percent to 59 percent.
- The number of Americans who feel secure in their job essentially remained the same this month, declining slightly from 66 percent to 65 percent, well within the poll's margin of error of plus or minus 3 percentage points.
The index combines responses to 10 questions on Americans' views about their leaders, the direction of the country and their future. Index polling began in July, and that month's results provide the benchmark score of 100.
A score above 100 indicates the public mood has improved since July. A score below 100, like the one this month, shows the mood has soured since July.
Demand (GDP) = Consumption + Investment + Government purchases.
Net Consumption makes up about 70% of total demand. The other 30% consists of net Investment and Government spending. So total demand is almost entirely dependent on current Consumption and the anticipated consumption that Investors base their Investment plans on. Look at item 5 above. Investors see nothing hopeful to expand net Investment for. Any additional funds given to Investors will be invested outside the U.S. where economies are growing.
Until there is a reason for total demand to increase, the economy is not going to turn around.
The rest of the poll results are largely caused by most people recognizing that economically we are in for difficult times. Oil at $132 per barrel is not a source of consumer confidence.
Addendum May 22, 2006 7:06 CDT
The NPR Morning Edition just reported that credit card companies say a lot of people have started using credit cards to pay for food and gasoline. This means that consumers are not going to increase general consumption. They are stretched just buying essentials. That is not a good sign for an economy already in trouble because of inadequate consumption.
This is in addition to the report several weeks ago that late credit card payments are increasing.
This economy will not come out of the recession until consumption begins to increase. Instead, as long as nothing is done to get more money to consumers, we are going to see an increase in unemployment (which itself will decrease consumption) and a decrease in total GDP.
2 comments:
I'm sure you find this to be an emotionally satisfying narrative. But, you're just flat out wrong and the RELEVANT data prove it.
It is increasingly unlikely that we are currently in a recession or that we will be at any point in 2008.
Get some objective, quantitative facts and some much needed perspective here:
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The Recession of 2008 That Wasn’t?
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I looked at your data, and it isn't relevant.
First, it is the wrong data. It comes from the St. Louis Federal Reserve only. That data can't be generalized to the U.S. economy as a whole.
Then the personal income figures are in nominal terms without adjustment for inflation. Also, there is no accounting for the increase in the total economy based merely on an increased working population. That means there is no Per Capita income adjustment. We can all be getting individually poorer as the GDP grows. Which leads to my next point.
There is also no comparison of the actual cost of living to personal income. A mere CPI adjustment of income data doesn't show the actual effect of changes in cost of living. As energy and food costs rise, the rest of the economy suffers, and much of the energy cost is money that leaves the American economy and goes overseas.
Another flaw is that the data, even for the St. Louis regions, describes only individual worker income, not family income which is the most relevant metric.
All of which leads to the second and most important reason why the data you present is not relevant. And that is the central problem in our economy today (and for the last three decades) is that consumers do not have sufficient real income to maintain existing macro-economic demand, let alone increase it. This is a basic structural problem that cannot be corrected as long as total financial free market philosophies prevent the government from going back to support the middle class instead of the most wealthy.
As I keep pointing out - the current recession is based on inadequate consumer demand. That inadequate consumer demand is caused by consumers not having any real increase in income (and only real wage income is permanent) that can pump up the total GDP.
By the way, thinks for the comments. You are getting me to reevaluate what I have written, and that is always good.
One further idea that I'd suggest rather than assert is that I think that the GDP is inflated by meaningless financial transactions that have no significant effect on the real economy. Financial transactions in large sums are handled by computers with very little labor cost. Unfortunately, that consumption which makes the economy work and grow is based on labor income in terms of wages, put together with the reductions in savings.
I suspect that large investment bank financial transactions do almost nothing to build the real economy and have little useful effect in reallocating resources. The original loan or stock sale did all the reallocation of resources. The large financial computerized transactions don't represent reallocation decisions that apply to real resources. All they do is perhaps pump up GDP figures. When I get time I need to check to see if that's accounted for in the national accounting process.
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